Authored by Neha Kalia, Consultant-The AZAD Programme
Not too long ago, insurance in the Indian context was synonymous with LIC. In the LIC ads you typically saw a man in his late 40s kicking the bucket and dutifully leaving an LIC policy that his wife then used to marry off their daughter.
But none of the ads showed a young man dying, or showed how his wife ran the house on a daily basis. How did she pay for groceries, rent, schooling, and medical expenses…forget paying for a wedding? What about double income homes where the woman dies…no that would be too much…how could they show a man suffering financially if his earning wife died?
Insuring Life an afterthought even for life insurance companies
Even today when there are so many players in the market, much of the advertising focus is still on retirement planning and securing your own self respect in the twilight years. For some reason insurance companies shy away from the subject of death. Showing a fuzzy garlanded picture in the background is the most their marketing directors can bring themselves to show.
Mortality is a fact but one that each of us likes to forget about. We love to be ostriches with our heads in the sand and the insurance companies perpetuate this and use other emotional hooks instead like retirement planning or education planning to get us to buy a policy. Life cover comes with it just as an added benefit…a freebie thrown in. This is actually a huge disservice to the public at large.
Where’s the ad that rudely shocks you into realizing that you could literally get hit by a bus tomorrow. Where are the testimonials of widows / kids who had to struggle not only with the loss of their loved one but also had the financial floor fall out from under them. What about testimonials of those ‘fortunate’ bereaved ones whose dearly departed had the good sense to insure their life.
Misaligned Distribution Model
Perhaps a bigger disservice is pushing bundled products and dragging the premiums up. For a youngster in their late 20s or early 30s if an agent quotes a premium in lacs, many of them feel that it’s too much and they can’t afford it just yet. They put off the policy purchase by several years, waiting till they can afford it. Consequently they unwittingly also end up postponing their life cover. Shouldn’t a 30 year old buy a term cover now and an endowment policy later when he/she starts generating significant surplus?
They probably don’t do it because the agent never educates them that they can choose just a pure term cover for now. That’s because it’s not in the agent’s best interest to show them the merits of that option. Agent commissions are structured so that they barely make anything on a life cover but can make up to 40% of the first year’s premium on an endowment policy. So guess which product they are going to promote?
What’s not to like?
If the benefits of life cover weren’t enough by themselves, government taxation norms add the cherry on top. Proceeds of a life insurance policy paid out on the death of the policyholder are exempt from all taxation. Not only that, it is the only part of your ‘legacy’ that creditors cannot attach. What that means is that if you have, say, a personal loan outstanding, the bank can stake claim to your assets upon your death. What they cannot touch under any circumstances are the proceeds of your policy.
Many people think Indians don’t like to spend money on something that may not happen. But in this case do you really think a customer will be upset that after living a full life of several decades, their policy term ends and he doesn’t receive the death benefit?
So who has your back? Really.
So then why don’t more people go in for life insurance? Maybe we feel our extended family will take care of our spouse and kids. That may have been true in the previous generation where one took over the responsibility of the widowed bhabhi and her kids but do you really see that happening today?
Maybe we think our employer will pitch in? But that too is a luxury of the past where your employer would give a job to your spouse or child. Do you see your present employer doing that today?
What about our parents? Why do we only think of life insurance once we are married and have kids? What about a 25 year old starting his career to the financial relief of his or her parents? Do we as youngsters realize that we are also the retirement plan for our parents who are banking on their child looking after them in their old age? What happens to them if something happens to us?
Nothing spells ‘I love you’ quite like a term cover favoring your loved one. We need to have a public conversation about this and get people to actually think about what will happen to their loved ones if ‘Yam Raj’ decides to pay you a visit TODAY. Sadly the ‘Grim Reaper’ doesn’t give two weeks notice.
So what’s your excuse?
Compared to life insurance, auto insurance penetration is very high in India…largely on account of being mandatory. What if life insurance were made mandatory too? How fantastic that would be. Maybe it’s the only way to push awareness. Perhaps it could be made another statutory deduction like PF or Gratuity.
There is really no rational explanation for why someone who can afford life insurance doesn’t buy it. It’s only an outcome of our human tendency to procrastinate unpleasant tasks coupled with the insurance companies acting as enablers and not having the stomach to shake us out of our comfort zone.
Simple no-frills policies are available at the click of a mouse button. Visit any insurance aggregator website and you will find quick and dirty analysis and comparisons that can help choose the policy that’s right for you. In 10 to 15 minutes, you will have completed a transaction that provides unparalleled security and assurance to your loved ones. What’s your excuse for not doing it today?
Life is uncertain death is not. Logically there is NO rationale for not taking a life cover today. Its affordable, its benefits are obvious and every earning individual should have one.